For an item so nice, would you like to pay for it twice?

Opting to pay a 'simplified' use tax could cause sales to be double taxed

By Charles F. Spielmann

Mar. 2012

Collection of sales and use tax has become serious business. So serious, in fact, that there have been several highly publicized cases recently where federal lawmakers or individual states have attempted to force online retailers to collect tax on some, if not all, of their out-of-state sales.

Many editorialists, battling back and forth on the merits of an “internet tax,” are forgetting that states already have a method for getting their “fair share” of tax on out-of-state sales. It's called use tax.

Unlike sales tax, which is collected and remitted by a retailer, use taxes are the responsibility of the purchaser and are due any time sales tax is not collected. All but a handful of states lay claim to it. The problem with use tax, as states see it, is that few individuals understand it, even fewer pay it, and it's difficult to enforcing its collection.

Almost half of the states have recently included an entry on individual income tax returns where taxpayers can voluntarily calculate an amount for use tax liability. Still, very few individuals have proved willing to save a year's worth of online receipts and pay their use taxes this way.

Many states are now allowing residents access to a simplified use tax lookup chart in the hopes that it will increase compliance.

The use tax chart is intended to make it easier for residents to meet their non-business related use tax obligation by providing them with a set figure based on adjusted gross income (AGI). For instance, Californians filing their 2011 state income tax with an AGI of between $150,000 to $199,999 will be allowed to enter $123. This chart can be used as long as any single item purchased cost less than $1,000 and the filer isn't required to have a Consumer Use Tax account.

California has a vested interest in making use tax as easy as possible to pay. The Board of Equalization estimates about $1.1 billion in use taxes go unpaid each year. The state has been struggling with record budget shortfalls and it is estimate more than $10 million in additional use tax will be collected this year.

On the surface, this sounds like a great idea. Income tax filers are provided a simple figure to enter on their tax forms, saving them time and the hassle of collecting and calculating totals from individual receipts and e-mails for every out-of-state purchase they've made over the last year.

While “simple” is tempting, some individuals may find they are paying use tax on an item that sales tax has already been collected on.

Many states are filling budget holes by widening the taxpayer base.

Once, a business only had to collect and remit state sales taxes if they had a physical presence in that state - also known as nexus. Increasingly, states such as New York and California have redefined what constitutes nexus to include affiliate marketing.

California recently passed a law saying that any company advertising products on an in-state based web site, and paying said affiliate a commission, constituted nexus. A very public battle ensued between the state of California and Amazon.com resulting in the company vowing to terminate all affiliate programs within the state rather than collect the sales taxes.

Needless to say, California's lawmakers understood what a huge economic blow that would be, and the lawsuit ended in a settlement which temporarily allows Amazon to retain their existing affiliates as is, with an ill-defined promise to begin collecting state sales tax at a later date.

It is already difficult for a consumer to predetermine whether an online retailer has a physical presence in their state. With ever-changing definitions of nexus, as well as inconsistent court rulings on the subject, it will be basically impossible. More and more online retailers will give in to the inevitability of having to collect sales taxes, and will start quietly adding tax on every sale. It will be easier and easier for purchasers to forget or misunderstand that they have already paid tax on internet purchases and that use tax is not required on those sales.

Until online retailers have a more clear set of rules to go by, you might find it is worth your while to hold on to those receipts and do the calculation yourself rather than fall back on the oh-so-simple state-calculated use tax chart.

Canadian economists call for end of sales tax exempt items

Ottawa examines the political feasibility of a repeal of the tax-exempt status of items such as food, tuition, medicine and services as a way to increase sales tax revenue by up to 60 percent.

Read more

State sales tax deductions still in effect

The on-again, off-again federal tax deduction for residents of states without income tax is in effect for 2011. Tax return filers who itemize their deductions and meet other qualifying criteria in the states of Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming could be eligible.

This deduction was not part of the recently approved payroll tax bill, so it is unclear if general sales tax deductions will be allowed for 2012 returns.

Read more

Sales tax holiday approved in Florida House

The measure (HB 737) passed unanimously Feb. 15 to allow a 3 day holiday this year from August 3rd to the 5th. Florida has offered a sales tax holiday 10 times since 1998. When the economy was better before 2008, the tax break was held from 7 to 10 days. But the last two years, it has been reduced to a three-day period.

Read more

Washington republicans want sales tax hike off the table

A supplemental budget proposal released by House Republicans Feb 17 doesn't include a sales tax increase proposed by Gov. Chris Gregoire. The proposal does include $840 million in cuts to 51 different state programs, including elimination of health insurance for the poor. The final budget, however, will be determined by the majority Democrats in the end.

Read more

Everything you’ve ever wanted to know about Canadian sales tax

It’s okay, it's perfectly natural to be curious

By Charles F. Spielmann

Feb. 2012

Canada’s Goods and Services Tax (GST), or, as a tip of the beret to our French-speaking northern neighbors, Taxe sur les produits et services (TPS), is a multi-level value added tax (VAT) that was introduced on Jan. 1, 1991. The GST replaced a 1920s-era Manufacturers’ Sales Tax (MST) which had been blamed for hindering exports.

Canada’s sales tax differs from that in the United States in a fundamental way: it is essentially a coordinated two-level sales tax structure. The federal government, in the form of the Canada Revenue Agency, collects 5% of all retail sales that are not tax exempt (not zero-rated sales) in every province and territory countrywide. Each sub-national unit then has the option to collect its own VAT, Retail Sales Tax (RST), or no tax at all.

In addition to the federal GST, Canada’s territories and provinces can fall under the jurisdiction of either the Harmonized Sales Tax (HST) or a form of a Provincial Sales Tax (PST). For the sake of simplicity, Zip2Tax has grouped the differing kinds of PST into a single column on our sales tax table. The Quebec Sale Tax (QST, or TVQ [Taxe de vente du Québec]) and RST amounts will appear in the PST column.

One ungainly "hitch" with the provinces of Quebec and Prince Edward Island is that they have elected to apply the VAT tax after the GST has been added to an item’s retail price. In the sales tax table for these regions you will note that the column for "Sales Tax Rate" will reflect the "effective" total sales tax rate and not the sum of the individual tax districts to compensate for this seeming "tax on a tax".

While not exactly elegant, Canada’s sales tax system has far fewer convolutions than nearly any of those in the United States which have been known to layer on special tax districts with no discernible pattern and vary randomly from state to state in rates, jurisdictions, exemptions and remittance.

You can look at America’s tax system as being additive, while Canada takes the opposite approach. In the United States, each state can hike taxes in individual jurisdictions whenever lawmakers in a municipality wish to raise funds for a certain project. In Canada’s subtractive solution, everyone in a given province or territory is taxed at the same rate and then granted VAT relief in the form of rebates based on income and tax exemptions returned to the consumer as a tax refund.

Along with exemptions for various grocery items, special treatments are provided for other activities including small businesses, nonprofit organizations, charities, the so-called MASH (municipality-academic-school-hospital) sector, tourist expenditures by non-residents, real estate, and financial institutions.

Even though it is controversial to this day, Canada'’s sales tax system has proven to be not only successful, but has some innovations that could be used as a model by the United States should calls for a federal sales tax gain traction.

For detailed information, check out the paper "SALES TAXES IN CANADA: THE GST-HST-QST-RST "SYSTEM," by Richard M. Bird and Pierre-Pascal Gendro, available on the American Tax Policy Institute’s web site.

Sources: the American Tax Policy Institute, the Canada Revenue Agency, and Wikipedia

Do you know the sales tax sourcing for the states in which you do business?

By Charles F. Spielmann

Jan. 2012

It’s important for businesses to know not only which sales tax laws apply to the products and services they provide, but also whether the source of the sales tax rate is based on origin or destination.

The majority of states have a destination-based sales tax. This means the sales tax applied to a purchase is determined by the jurisdiction where the products is received by the purchaser. This can be the address that a purchase is shipped to or the location that the customer takes possession of the merchandise.

Destination-based systems can be complicated for retailers because the burden of staying up to date with ever-changing tax rates for all jurisdictions within the state or states in which they have nexus falls upon the retailer. Filling tax returns in these states can be doubly complicated since some require the retailer to precisely track and break their sales down for each jurisdiction.

As of this writing, the following states are destination based: Alabama, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin and Wyoming.

There are several states where sales taxes are origin based. Sales taxes in these states originate from the point of purchase regardless of where the customer receives the merchandise. This method is much simpler for the merchants.

The origin-based states are: Arizona, Illinois, Mississippi, Missouri, New Mexico, Pennsylvania, Texas, Utah and Virginia.

In an interesting exception to the two sourcing bases already mentioned, California is considered a modified origin state. While sales taxes are origin based at the state, county, and city levels, special districts are destination based.

Alaska proves to be its own special case. The state doesn’t impose any sales or use tax, but various boroughs and municipalities do. There is no uniformity between these municipalities and no ordinance can be considered “typical,” so Alaska is essentially non-classifiable at a state-wide level.

Freight On Board

Where does the legal title transfer to the buyer?

By Jim Frazier

The Sales Tax Guy

Jan. 2012

When I started writing this, I thought I'd give you a link that would explain what FOB meant.  I was surprised that there are several different meanings for “Freight On Board (FOB)” other than the one I was going for.   This Wikipedia article should be sufficient to help you understand this term as I plan to use it.

To oversimplify, FOB means where the legal title to the shipment transfers to the buyer.  If the terms are FOB Origin (or shipping point), then the legal ownership of the goods transfers when the seller ships them.  If the terms are FOB Destination, then the seller hasn't transferred the ownership to the buyer until they arrive at her receiving dock.

Legal ownership determines who is responsible for the freight, and who suffers the economic loss when the shipment is lost in transit.  If you're the seller, you want to transfer ownership immediately, which means you're going to want the terms to be FOB Origin.  If the item is lost, it's the buyer's problem.

On the other hand, if you're the buyer, you would prefer to have the terms be FOB Destination, which means that the seller still is responsible for the shipment, until it arrives at your dock.  Purchasing agents usually negotiate terms as FOB destination just for that reason, particularly on more expensive items.

The question of the effect of FOB comes up frequently in sales and use tax conversations because people think that the FOB point determines the state that has jurisdiction over the transaction.  It doesn't.

The state that has jurisdiction is, very simply, almost always the state where the physical delivery occurs, or where the buyer takes control over the goods - which is pretty much the same thing.  This is because the tax that is imposed, when we're talking about an interstate sale, is use tax.  And use tax is generally imposed when the buyer uses (or controls) the goods.  No matter what the terms are, the buyer doesn't control the goods until they arrive at her dock (if shipped by common carrier).

Conversely, if the buyer (or their agent) picks up the goods herself (not using a common carrier), then the physical delivery occurs at the shipper's dock.  This is so, even if the original terms of the sale were FOB Destination and the buyer changed her mind at the last minute.  What counts is where the physical transfer of control took place, not where the contract terms state the ownership transfer occurs.

Think about it.  If it was that easy to manipulate the state that had jurisdiction, then all Amazon.com would have to do is put their warehouse in Oregon (no sales tax in Oregon), and then ship everything FOB Origin.  Then there would simply be no tax at all.  But that's NOT how it works.  What determines the state with jurisdiction is where the physical, real transfer of possession or control takes place.  That's an event that can't be manipulated by contract language.   And so that's the event that really counts.

When FOB does matter 

Having said all of that, there are two states that specifically say that the FOB point determines which state has jurisdiction - Tennessee and New Mexico.

Tennessee isn't really a problem because they have a big loophole.  As long as the seller arranges for the shipment of the goods, and the buyer doesn't pick them up, or arrange for the pickup, Tennessee doesn't claim jurisdiction.  But if the buyer picks up the phone and calls the common carrier and arranges for them to pick up the goods at the dock in Tennessee, then Tennessee does claim that they have jurisdiction.  The easiest way to solve this problem, other than letting the vendor arrange shipment, is to make sure the terms are FOB Destination.  Then the loophole is moot.

New Mexico is different.  They have no loophole.  If you order something FOB Origin from Albuquerque, New Mexico says that the tax belongs to them.  Period.  This goes in the face of all of the things we talk about regarding interstate commerce.   But the reason NM can get away with it is because they don't really have a sales tax.  They have a gross receipts tax that is solely imposed on the seller.  Since the transaction itself isn't being taxed, New Mexico can simply say that they get all of the taxes on anything that is sold in New Mexico, even if it's shipped out of the state.  However, they are fair.  If the terms are FOB Destination, they don't claim jurisdiction.  So, as with Tennessee, the best solution when you're buying from NM is to make sure the terms are FOB Destination.

Please remember that there are some complications if you decide to make all of your purchases FOB Destination.

1. The vendor may not be interested in doing this.  This is often an easy negotiating point, but sometimes the vendor stands firm. And you have to bring it up if you want the change.  All sales contracts, if they're written by the seller, will state the terms as FOB Origin.  That makes sense, since those terms are best for the vendor.
2. You may wind up paying the freight if the terms are FOB Origin.  That could be a significant amount of money - even more than the sales tax.  So watch this one.
3. In some states, the freight may be taxable if the sale is FOB Origin. 

Summary 

FOB points don't count in determining the state that has jurisdiction.  What matters is where the goods are physically delivered.  Well, that's except for two states: Tennessee and New Mexico.  In those two states, the FOB point should be Destination to make sure the tax is for the delivery state.  And since purchasing usually works to set this up anyway, it may not be a big problem.

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Disclaimer: This is intended for education and entertainment only and is not intended as legal advice. Tax laws can vary significantly depending on the type of business, product, location, and other factors not fully explored here. Always consult a qualified attorney, CPA or tax adviser who is an expert in sales and use tax law for your area before making business decisions.

A policy a day keeps the auditor away

By Jim Frazier

The Sales Tax Guy

Nov. 2011

I was doing a class in Miami and we had just broken for lunch. I had been talking about why you should have sales and use tax policies and procedures. "Mike" came up to me as everybody else hurried out and said, "You know, that policies and procedures thing really works."

Sensing a good story, I sat down and encouraged him to continue.

Mike said that, a couple of years ago, he had gotten word that the Florida Department of Revenue was going to conduct a sales tax audit. About a month before the audit was scheduled to begin, the auditor shows up for the pre-audit meeting.

Auditor: I don't suppose you have a sales tax manual that I can look at, do you? (She really didn't expect it...she was just going through the questions on her checklist.)

Mike: Yes, as a matter of fact, we do. I've made a copy of our accounting manual for you, and I've put yellow sticky-notes on the pages related to sales and use tax (ta da!).

Auditor: Oh. Great (flipping through the binder).

Auditor (three days later, the auditor calls): Hey Mike, I just took a look at this sales tax manual. Wow, you've really covered the bases here. Heck, I've even gotten some good ideas out of it. Listen, honestly, do you actually follow these procedures?

Mike: Yes. You'll notice that there are revision dates on all of the procedures and we update them whenever there's a change. And we review the entire manual once a year.

Auditor: OK. Listen, we scheduled me in for six weeks. But let's change that to my coming in for just one week. I'll do some testing of your procedures manual and talk to some of your people, then we'll see how to handle the rest of the audit. Oh, and those 1,000 documents I told you to pull...just pull the first 100 for now.

Auditor (on Friday of the initial week of the audit): Mike, I've got nothing. You've got your ducks in a row, and you're not doing anything systemically wrong. There's no point in continuing. We'll call this audit closed and I'll put a note in the file that you guys have systems, policies and procedures in place. Now, I'm off to audit someone who doesn't have a good sales tax manual.

Having well documented systems gives you enormous credibility with the auditor. They want to be productive and, if you appear to have "your ducks in a row", they know they're going to be wasting time. So they might just cut your audit short and go bother someone else.

So the question is, do you have a good sales tax manual? Or is the auditor going to be cutting another audit short to come and nail you?

True story, by the way.

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Disclaimer: This is intended for education and entertainment only and is not intended as legal advice. Tax laws can vary significantly depending on the type of business, product, location, and other factors not fully explored here. Always consult a qualified attorney, CPA or tax adviser who is an expert in sales and use tax law for your area before making business decisions.

Steps to help you survive an audit

By Charles F. Spielmann

Nov. 2011

States have been under enormous pressure during this extended recession to balance budgets without raising taxes. With so many Americans still unemployed or under-employed, states are bringing in reduced sales and income tax revenues while being asked to provide expanded social services. As a result, states have been increasing the number of audits they perform and they’re using high-tech methods to examine every penny.

Keep in mind that this audit-your-way-to-fiscal-balance-method works very well, but it has made it necessary to hire many new and inexperience auditors. Some of these hires have very  little training and are often learning while on the job.

While audits can be somewhat less enjoyable than passing a kidney stone, there are some simple steps you can take to help get you through the pain.

1. Schedule the audit to begin on a date when you will have adequate manpower available to assist the auditor by providing documentation and answering questions.
2. Make sure you have a sales tax/accounting manual and that your procedures show regular updates have been occurring.
3. Review your documentation to make sure it is up to date and orderly, including:
   • Sales figures
   • Accounts payable
   • Exemption certificates
   • Purchases, including out-of-state
   • Ledgers, journals, and adjustments
   • Filed returns
   • Credits and claims for refunds
4. Treat the auditor as a professional with appropriate courtesy. Provide them with adequate working conditions.
5. Be consistent with your answers. Do NOT lie.
6. Convince the auditor that you are confident in your compliance. Keep in mind that you know a lot more about how your business operates than the auditor does.
7. Watch for overpayments.
8. Be prepared to get professional help.
9. Be prepared to negotiate.

Remember, audits are like the holidays -they seem to sneak up on you out of the blue, they create chaos, and you have to spend a lot of time with people you don’t really care for. You’ll get through it, I promise. Just smile, play nice, and stock up on Alka-Seltzer. And when it’s over, if you feel the need for a little passive-aggressive payback, you can always thank your auditor with a nice fruit cake.

Sales tax issues on the November ballots

Nov. 2011

The November vote, while mostly unremarkable from an electoral standpoint, offers a chance for residents to weigh in on sales tax resolutions. Here are a few making the news this year.

Glynn County, GA– Vote on whether to extend the 1-cent SPLOST VI local tax.

Marion, OH – Vote on whether to implement a 0.5% sales tax for six months.

Harrisburg, PA – Pennsylvania’s legislature considers a bill to add a tax exemption for sales and service of airplanes.

Cook County, IL – County Board president considers staggered  roll back of predecessor’s 1% tax increase.

Is shipping taxable?

Just for once, wouldn't it be great if this was a "yes" or "no"?

Oct. 2011

By Jim Frazier
The Sales Tax Guy

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Disclaimer: This is intended for education and entertainment only and is not intended as legal advice. Tax laws can vary significantly depending on the type of business, product, location, and other factors not fully explored here. Always consult a qualified attorney, CPA or tax adviser who is an expert in sales and use tax law for your area before making business decisions.

Illinois

“Rahm tax” could lower Chicago rates by expanding base

Sept. 28, 2011

Chicago Mayor Rahm Emanuel said that he plans to reduce the city’s portion of the sales tax from 1.25 percent to 1 percent, but broadening the base to include an array of services not now covered.

Read more…

California

Amazon wins reprieve on collection of sales tax

Sept. 28, 2011

Amazon.com Inc. has struck a deal with the state of California which will temporarily get the company off the hook for remitting sales tax to the state. In return, the internet giant has agreed to drop efforts to force a ballot referendum and instead turn their massive lobbying power toward urging congress to adopt a national solution to the out-of-state online sales tax collection issue.

Read more…

Sales tax rate change proposals in the news

• Kansas City, KS
• Orange County, NC
• Donaldsonville, LA
• Middle Georgia Region, GA
• Joliet, IL
• Hitchcock, TX
• Stark County, OH

States are doing more to find you

Data mining turns up a mother lode of unpaid taxes

Sept. 2011

By Jim Frazier
The Sales Tax Guy

States and the IRS are using data-mining techniques to find you. In non-technical terms, the states are reviewing other databases and records to look for something fishy.

Texas, for example, collected $5 million dollars by comparing federal airplane registrations with state tax records to find companies that haven't paid their use tax on the planes. Bad, bad companies.

In the past, states didn't have the expertise, staff or equipment to do some of these projects. But now things are getting cheaper, easier and they're outsourcing.

Another interesting scenario was a typical pizza parlor. The state might compare the sales tax returns with the personal returns of the owner with the returns filed by other pizza shops in the area with sales by vendors TO that pizza shop.

It's getting tougher and tougher to fly under the radar.

Here are the states a BusinessWeek article mentioned: Texas, Iowa, Virginia and Massachusetts. But beware, your state may read BusinessWeek too!

Disclaimer: This is intended for education and entertainment only and is not intended as legal advice. Tax laws can vary significantly depending on the type of business, product, location, and other factors not fully explored here. Always consult a qualified attorney, CPA or tax adviser who is an expert in sales and use tax law for your area before making business decisions.

ZIP code changes in the news

Sept. 2011

There were 9,377 changes this month to the United States Postal Service's ZIP code system.

It appears that 3,700, mostly rural, post offices are in the sights of the Washington budget cutters. Be aware that these closings often mean the consolidation of ZIP codes and have the potential to effect sales tax jurisdictions. Click here for the current list of soon-to-depart post office branches.

The following Post Offices were closed over the past two months:

• 50433 - DOUGHERTY, IA
• 62805 - AKIN, IL
• 47110 - CENTRAL, IN
• 67118 - NORWICH, KS
• 42441 - NEBO, KY
• 41255 - SITKA, KY
• 63432 - ARBELA, MO
• 63535 - COATSVILLE, MO
• 39558 - LAKESHORE, MS
• 39572 - PEARLINGTON, MS
• 39460 - MOSS, MS
• 39576 - WAVELAND, MS
• 44492 - WEST POINT, OH
• 15565 - W. SALISBURY, PA

It's Sales Tax Holiday Time Again

August 2011

Parents everywhere are brimming with excitement in anticipation of sending their kids back to school. As much of a relief as that can be, the list of required supplies the school just sent out, not to mention the endless fashion items the kids claim they just HAVE to have, can make that feeling of joy drain away quickly.

This year, sixteen states have taken pity upon these unfortunate parents and implemented brief sales tax holidays on many of the items associated with the proper care and feeding of young minds.

Every state has its own set of rules, but, in general, clothing, accessories, sporting goods, computers and software, books and maps, non-commercial office and art supplies (like paper, pens and pencils, calculators, lunch boxes, etc.) and other such items may be eligible.

As eager as parents are to take advantage of the savings, these holidays can make the retailer's job a whole lot more complicated.

It falls upon the retailer to check with each state and pay close attention to the exceptions to the exemptions. Take Alabama for instance. They've set an upper dollar limit of $100 on clothing. That's pretty straight forward, but the rules get more tricky. Alabama has decided that non-commercial bound books with ISBN numbers less than $30 are exempt, but periodicals aren't. Personal digital assistants (PDAs) are, but cell phones aren't. You can bet customers won't hesitate to complain to the state if they feel they are being "ripped off."

For another thing, even while the state might be forgiving foregoing the sales tax, that doesn't mean that every county, city and special district is as well. Consumers rarely realize that even if they shop on the right day and pick up the right item, they might still owe taxes to the local municipality. The retailer gets the joy of explaining that tidbit.

In an effort to help out, the following is a list of this year's participating states, the dates of this month's holidays, and a link to the state's particulars on qualifying items.

• Alabama, Aug. 5 - 7
• Arkansas, Aug. 6 - 7
• Connecticut, Aug. 21 - 27
• Florida, Aug. 12 - 14
• Iowa, Aug. 5 - 6
• Louisiana, Aug. 5 - 6
• Maryland, Aug. 14 - 20
• Mississippi, July 29 - 30
• Missouri, Aug. 5 - 7
• New Mexico, Aug. 5 - 7
• North Carolina, Aug. 5 - 7
• Oklahoma, Aug. 5 - 7
• South Carolina, Aug. 5 - 7
• Tennessee, Aug. 5 - 7
• Texas, Aug. 19 - 21
• Virginia, Aug. 5 - 7

Note:
Illinois, Massachusetts and Vermont had sales tax holidays last year, but failed to enact the required laws this year.

Sales and Use Tax Books You Should Own

July 2011

By Jim Frazier

These are sales and use tax books that I strongly recommend as reference tools. If you have to worry about a few state s, you really should own them. If you are in only one state, they may be overkill, but are still worthwhile. Both books cover all of the states.

"Guide to Sales and Use Taxes" (from Research Institute of America)
This book has an enormous amount of information for each state, with the material broken up into 15 subchapters within each state chapter. It also has an opening chapter which is basically "sales tax 101." If the book is weak, it is in two areas: there aren't any citations, and it sometimes provides too much data with too little interpretation. These deficiencies are made up for in the next book.

"Sales and Use Tax Deskbook" (from the American Bar Association)
Each state's treatment is written by an attorney who specializes in that state's sales and use taxes. While I've only met a couple of them, I heard of many more. So far, they have all been heavy SUT litigators and highly "plugged in."

The book actually provides less detail than the "Guide," but does provide more interpretation of the laws, as well as citations. So you can read the basic information, then drill down to the statute, regulation, bulletin, court case, opinion letter, etc.

Here are two particularly useful items provided by the "Deskbook":

1. It gives you the rules for taxation of exports out of the state. Now you'll have ammunition for your discussions with vendors who are charging you their state's tax as opposed to the correct one (yours).
2. For most states, the book shows the "drop ship" rules, which will, again, help with vendors who really don't understand this particular topic.

I actually recommend both books if you have the budget.

First of all, owning both books gives you the ability of second sourcing or even third sourcing your research. It's always helpful, on confusing issues, to see if the books agree.

The other reason is updates. By owning both books, you can flip-flop your purchases. One year get an updated version of the inexpensive book, next year get the expensive one, and so on.

Finally, you'll notice I'm not offering to sell you these books. That's because I want you to trust that I'm not biased here. I'm not recommending them to make money. Contact the publishers and they'll be happy to sell them to you.

About Jim Frazier: Also known as “The Sales Tax Guy," Jim writes the weekly blog http://salestaxguy.blogspot.com and has been hosting seminars and webinars on sales and use tax topics nationwide for the past eight years.

Disclaimer: This is intended for education and entertainment only and is not intended as legal advice. Tax laws can vary significantly depending on the type of business, product, location, and other factors not fully explored here. Always consult a qualified attorney, CPA or tax adviser who is an expert in sales and use tax law for your area before making business decisions.

Read more…

Florida looks to send BP a bill for lost sales tax revenue

June 2011

The complex task of determining how much revenue, whether it be sales taxes or hunting and fishing license fees, that Florida lost due to the Gulf of Mexico oil spill began in June.

State economists held the first in a series of meetings that may not be completed until early next year as part of the effort to come up with a number Florida can present to BP for reimbursement.

The British oil giant owned the Deepwater Horizon well that spewed oil into the gulf. The spill crippled many fishing and marine-related businesses and caused tourists to stay away from Gulf Coast states, although most of Florida's beaches were unaffected. That reduced a variety of tax and fee collections.

Read more…

S.C. Senate shoots down sales tax free gun sales weekend.

June 2011

The South Carolina Senate has shot down a proposal to continue sales tax-free gun sales over Thanksgiving weekend.

The proposal – dubbed the "Second Amendment Weekend – has been included in the budget the past three years, but economists estimate the state loses about $250,000 in sales tax by exempting rifles, shotguns and some handguns from sales taxes during the three-day period.

Read more…

State budgets cause tax tweaks

June 2011

The Rhode Island House of Representatives approved a budget with expanded taxes which now include software downloads, non-prescription drugs and sightseeing tours.

Read more…

Maine does away with aircraft sales taxes

June 22, 2011

A new law eliminating sales taxes on aircraft and parts aims to give the aviation businesses a boost and improve Maine’s image.

Read more…

Tax break for Nebraska tanning salons gets burned

May 2011

LINCOLN -- State senators turned down a proposed sales tax exemption for Nebraska tanning salons. Sen. Jim Smith of Papillion had sought the exemption, arguing that salons deserved a break because of a new 10 percent federal excise tax on tanning services that was enacted to help pay for federal health care reforms.

Read more…

What states do you need to pay sales tax in?

Basic rules about establishing nexus

June 2011

How do you know whether your business has established sales tax nexus in a given state? There is no uniform, across-the-board set of laws that apply from state to state; while each state has its own specific laws, in general nexus might be considered established if any of the following apply:

1. Your company has a physical location or property (tangible or intangible) in that state
2. Your company participates in a trade show or is otherwise generating sales in that state - even (in some states) for just one day
3. Your company engages in a substantial amount of advertising in that state, or your employees engage in regular business solicitations there

Additionally, some states are beginning to determine that nexus has been established when a retailer enters into a revenue-sharing agreement with an individual located in such a state who places a link on his or her Web site back to the retailer’s site. Depending on the state, an established threshold dollar amount in the retailer’s gross receipts (often $10,000) may need be reached before a retailer is affected.

When its "click-through nexus" bill goes into effect July 1, Illinois will join the growing number of states with such laws on the books and those that are contemplating them. Texas and Vermont are just two out of about a dozen states that have introduced click-through nexus legislation this year, with more certainly on the way.

These laws are still relatively new, with growing pains sure to come. A legal challenge to New York state’s 2008 click-through nexus law by online retailers Amazon.com and Overstock.com was unsuccessful, but may change the future of sales tax nexus if the case returns to the state supreme court.

In the face of so many different laws and an ever-evolving taxation landscape, how can you know if your business is affected by a state’s click-through nexus laws? In general, be aware of the activities in which your company and its agents engage, and where. Keep track of and monitor any sales, advertising and/or business solicitations that take place outside of your company’s home state. Above all, if you think you may have a nexus in another state, contact that state’s department of taxation/department of revenue to confirm and find out what is the next step.

Proposed Vikings stadium sales tax increase causes concerns

May 2011

St. Paul, Minn. Mayor Chris Coleman is asking for proof of financial benefits for the residents of Ramsey County before he gives the go ahead for a half-cent countywide sales tax increase to fund a proposed $1.1 billion retractable-rood stadium for the Minnesota Vikings football team.

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Oklahoma loses case over control of city taxes

May 2011

The city of Tulsa is celebrating a victory over the state of Oklahoma in a fight over the city’s right to collect sales tax. After more than a year, a judge ruled the law requiring cities and counties to use the Oklahoma Tax Commission for tax collection unconstitutional.

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Arkansas localities try to balance loss of tax income

May 2, 2011

After a winter legislative session dominated partly by a move to cut state taxes, local proposals to raise taxes are sprouting all around Arkansas as municipalities seek to make up for lost income.

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Sales tax revenue is up across the country

May 2011

As the effects of the recession slowly loosen their hold on the U.S. economy, states and cities have been enjoying several straight months of revenue increases.

• Texas
• Tennessee
• Colorado

‘Amazon Tax’ Puts States in Quandary

A bill to collect sales taxes on Internet sales passed in Illinois could endanger small businesses relying on the exemption.

By Kelsey Snell for the “National Journal Daily”
March 28, 2011

When Illinois passed a bill this month that would force online retailers to collect sales taxes on goods sold in the state, it sparked more than just a war with online retail giant Amazon. The bill revealed a recession-fed competition among states that pitted the long-term revenue against the near-term desperation for jobs.

Across the country, states have been looking for any tax, incentive, or cut that could help bridge the growing chasm between resources and budget demands.

Read more… Related Links:

• Amazon Pressured on Sales Tax
• See similar proposed legislation in Florida

Georgia nears tax code overhaul agreement

March 28, 2011

Top Republicans said they are nearing an agreement on an overhaul of the Georgia tax code. The agreement shaping up would slap taxes on a number of goods and services, including auto repairs and the person-to-person sale of cars. But they are scrapping plans to tax things groceries.

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Tennessee Proposal Would Freeze Sales Tax Rate In 2015

March 25, 2011

Lawmakers are considering a proposal to cap the state’s sales tax rate at 9.75. The idea came forward while lawmakers were debating whether or not to change the Constitution to ban a state income tax.

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Oklahoma Enacts Use Tax Amnesty Program

March 14, 2011

Oklahoma Governor Brad Henry has signed the “Retailer Compliance Initiative,” enacting a use tax amnesty program. Under the legislation, amnesty initiatives are to be established by the Oklahoma Tax Commission for both out-of-state retailers and for Oklahoma consumers.

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Ohio rolls out a Use Tax Education Program

March 14, 2011

The Ohio Department of Taxation has introduced the Use Tax Education Program (UTEP) to work with Ohio businesses to understand and stay in compliance with use tax laws. The program offers financial incentives to businesses with use tax liability to pay what is owed.

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The Tax Foundation provides analysis of the Michigan and Connecticut tax proposals

March 10, 2011

Tax Foundation staff economist Kail Padgitt explains the tax changes proposed in Michigan Gov. Rick Snyder's recently-unveiled budget proposal, and Mark Robyn takes on the tax package being championed by Connecticut Gov. Dannel Malloy.

Listen to the podcast...

How much are you paying for sales taxes?

We all know about state-wide taxes, but do you know what you're paying locally?

March 2011

Retail sales taxes are often represented as a flat rate for each of the 50 states. In fact, many online shopping carts only allow merchants to input a single rate per state. In reality, for two-thirds of the country, local-option sales taxes make it considerably more difficult for merchants and consumers alike to know what the sales and use tax rates are. The Tax Foundation recently released a report, "Ranking State and Local Sales Taxes," by Kail Padgitt, that focuses on how different states and municipalities handle the vagaries of sales taxes and how they stack up against one another.

Read the report…

A prism-money blog on Reuters takes a look at what state sales tax rates could mean for you in 2011

Washington tax amnesty

Feb. 2011

A temporary tax amnesty program waives penalties and interest on certain unpaid Washington State business taxes. Applications must be received by April 18, 2011 and all taxes and filing fees must be paid by April 30. Limitations and exclusions may apply.

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Michigan sales tax amnesty

Feb. 2011

The Michigan tax amnesty will run from May 15 through June 30, 2011. The amnesty waives all civil and criminal penalties for not filing a return, not paying a tax, and for excessive tax refund claims on taxes due before Oct. 1, 2009

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Georgia becomes associate member to the Streamlined Sales and Use Tax Agreement

Feb. 2011

As of Jan. 1, 2011, Georgia was inducted as an associate member of the Streamlined Sales and Use Tax (SST) Agreement. Georgia will not be granted full membership until it is in complete compliance with all provisions of the agreement. Sellers can register with Georgia now, but are not required to do so until full membership status is achieved. Georgia is required to grant amnesty until 12 months after it achieves full membership (conditions apply).

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Colorado remote-seller sales tax reporting on hold

Feb. 2011

Enforcement of Colorado’s remote-seller reporting requirements may be scraped as a federal district court issued a preliminary injunction. The court found that the statute likely violates the federal Commerce Clause in that it is discriminatory against interstate commerce and places an undue burden on out-of-state sellers who only have contact with Colorado through mail or common carrier. The provision would have required that sellers notify Colorado customers of their obligation to self-report and pay use tax, provide their Colorado customers with an annual report that details the customer’s purchases from the seller in the prior year, and provide the Colorado Department of Revenue with an annual report including the name, address, and total amount of purchases for each of their Colorado customers.

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Connecticut proposes sales tax hike

Feb. 2011

Retailers and consumers alike reacted negatively to Gov. Dannel Malloy’s planned tax increase. The proposal would increase retail sales taxes from 6% to 6.35% and simultaneously eliminate a host of sales tax exemptions such as that on apparel under $50 and for services such as boat storage and repair. Business owners claim such a hike would virtually close down their businesses.

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What states do you have nexus in?

With states rewriting the criteria, don't be so sure you know

Feb. 2011

Once upon a time, not so long ago, a retailer had nexus in a state when they had a physical presence, a brick-and-mortar storefront, in that state. As online retailing gained popularity, states expanded that definition to include Internet sales between retailers and purchasers residing within the same state.

Now, those lines aren't so clearly drawn. Now, an increasing number of states are rushing to redefine nexus as a single mouse click.

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A federal Debt Reduction Sales Tax could be around the corner

A brief look at what the recently proposed deficit reduction plan would mean for retailers and small businesses

Jan. 2010

The Rivlin-Domenici plan, named for co-sponsors Alice Rivlin, Democrat and former Federal Reserve vice chairwoman, and former Senate Budget Committee Chairman Sen. Pete Domenici (R-N.M.), was unveiled Nov. 17 by the federal Debt Reduction Task Force. The plan charts a path to "create a balanced package of spending cuts and revenue increases that solves the debt crisis."

While many of its provisions affect primarily private individuals, the plan outlines proposals that would have an impact on the corporate world. Payroll, health insurance offerings and more would be affected.

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Use Tax Facts

Dec. 2010

Use tax is a tax on the use of goods or certain services when sales tax has not been paid. Goods are subject to either sales or use tax, but not both. Use tax, unlike sales tax, is due at the rate where the purchaser first uses the article, not where the sale takes place. Use tax may also due on any freight, delivery, or shipping charges paid to the seller.

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What they aren’t saying about the newest proposed sales tax bill

Oct. 2010

Main Street fairness and streamlined sales tax. What could sound more appealing? Who’s going to argue against fairness? I mean, you can hardly go wrong when you’re supporting good ole’ Main Street with its suggestion of American flags flying outside Mr. Whipple’s  local grocery store. And streamlined is better, right? It sounds like taxes will finally be standardized and made easier to comply with. Right?

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Illinois Business Tax Amnesty

Sept. 2010

Effective Aug. 16, Illinois has enacted legislation to establish a use tax amnesty program that will apply to all taxpayers including businesses. The Department of Revenue will offer taxpayers an amnesty period that will run from Oct. 1, through Nov. 8, 2010. Interest and penalties will be waived for taxpayers who pay all tax liabilities due for any taxable period ending after June 30, 2002, and prior to July 1, 2009. The department will not seek civil or criminal prosecution for any taxpayer who is granted amnesty during the eligible tax period. Taxpayers with eligible liabilities who do not participate in the amnesty program will be charged double the amount of interest or penalties that would otherwise apply.

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California sales tax notification legislation considered

Sept. 2010

If enacted, recently passed California legislation would require retailers, who are not required to collect use tax, to provide notification on their retail Internet Web site or catalog that tax is imposed on the storage, use, or other consumption in California of tangible personal property purchased from the retailer that is not exempt, and is required to be paid by the purchaser. If passed, this bill would be effective Jan. 1, 2011.

 

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New York eliminates clothing tax exemption

Aug. 2010

As of October 1, 2010, New York will repeal the clothing tax exemption on items costing less than $110. The move is expected to raise $330 million for the state.

Read more ... Fox News - Bloomberg - New York Daily News

Mississippi Reorganizes Tax Collection Agency

July 2010

2009 legislation became effective July 1, 2010, that eliminated the Mississippi State Tax Commission and, in its place, created the Mississippi Department of Revenue and the Mississippi Board of Tax Appeals. The purpose of this change is to provide taxpayers an administrative appeal to an independent board that has no direct ties to the agency that assesses and collects taxes.

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